In re Hawai'i Electric Light Company: Legislative Purpose, Greenhouse Gas Emissions, and the Public Interest

Article XI, section 9 of the Constitution of Hawai'i establishes “a right to a clean and healthful environment.”[1] Chapter 269-6 of the Hawai'i Revised Statutes gives effect to this provision by—among other things—setting forth various factors that the Hawai'i Public Utilities Commission (the “Commission”) must consider when approving purchase agreements between utilities and energy producers.[2] On March 13, 2023, the Supreme Court of Hawai'i issued a significant decision bearing on the relationship between these laws and the “public interest-minded” role of the Commission.[3] In In re Hawai'i Electric Light Company (HELCO III), the court drew heavily on an analysis of legislative purpose to conclude that the Commission’s duty to act in the public interest entails significant discretion to deny a proposed energy purchase agreement on account of projected greenhouse gas emissions and climate change concerns.

In 2012, Hawai'ian energy company Hu Honua Bioenergy made plans to convert an abandoned power plant to a renewable energy facility which would generate power by burning non-indigenous eucalyptus trees.[4] To that end, discussions were held between Hu Honua and the Hawai'i Electric Light Company (HELCO). HELCO then approached its regulator—the Commission—to propose an agreement to service Hawai'i Island’s power grid by purchasing energy from Hu Honua’s planned facility.[5] In 2017—after HELCO was granted a waiver to pursue the agreement free from the competitive bidding process—a hearing was held before the Commission.[6] Life of the Land—an environmental advocacy group—intervened in that proceeding.[7] Ultimately, an amended power purchase agreement (the “Amended PPA”) for HELCO to purchase power from Hu Honua’s proposed facility was approved by the Commission.[8]

Life of the Land then appealed to the Supreme Court of Hawai'i.[9] The court vacated the approval and remanded it to the Commission.[10] The court instructed that on remand, the Commission must (1) provide Life of the Land “an opportunity to meaningfully address the impacts” of the Amended PPA on its “members’ right to a clean and healthful environment”;[11] (2) give “express consideration” to greenhouse gas emissions “that would result from approving the Amended PPA” and “whether the cost of energy under the Amended PPA is reasonable in light of the potential” greenhouse gas emissions;[12] and (3) consider “whether the terms of the Amended PPA are prudent and in the public interest, in light of its potential hidden and long-term consequences.”[13]

On remand, the Commission did not reissue HELCO’s waiver from the competitive bidding process and thus declined to consider the merits of the Amended PPA.[14] Hu Honua appealed. In HELCO II, the Hawai'i Supreme Court determined that waiver was outside of the scope of the HELCO I remand, and it again remanded to the Commission—repeating its order from HELCO I.[15]

On remand from HELCO II, the Commission concluded that the Amended PPA was “not in the public interest” and rejected it.[16] This conclusion was based on four factors. First, the Commission determined that the project would produce “massive” greenhouse gas emissions, and was unconvinced that Hu Honua could deliver on a promise to achieve carbon neutrality by planting more trees.[17] Second, the Commission was “particularly troubled” by the project’s “frontloading” of emissions; the Commission determined that the project would not achieve carbon neutrality until 2047, two years after the 2045 zero-emissions target set by the Hawai'i legislature.[18] Third, the Commission concluded that the project would unreasonably raise rates for consumers.[19] And fourth, the Commission determined that the project would displace other renewable energy projects which might be more “environmentally friendly.”[20]

After denial of a motion for reconsideration, Hu Honua appealed. [21] On appeal in HELCO III, Hu Honua made three arguments. First, it argued that by considering energy prices, the Commission exceeded the scope of the HELCO I remand.[22] Second, it argued that the Commission improperly applied the relevant statutes by comparing the project’s greenhouse gas emissions to all energy alternatives, and not just fossil fuel alternatives.[23] Third, Hu Honua argued that the Commission violated Hu Honua’s due process rights by finding facts outside the record, applying a heightened evidentiary standard, and subjecting the project to a carbon neutrality requirement.[24]

The court unanimously affirmed the Commission’s decision as a proper exercise of its “public interest-minded mission.”[25] The majority opinion was written by Justice Todd Eddins.[26] Justice Michael Wilson concurred in a separate opinion.[27]

First, the court considered Hu Honua’s argument that the Commission had violated the remand instructions, which limited it to consideration of greenhouse gas emissions and forbid consideration of other factors such as consumer price impacts.[28] The court concluded that the instructions permitted—even required—the Commission to consider “the reasonability of the project’s pricing in light of” potential greenhouse gas emissions.[29] The court further concluded that, irrespective of the remand language, the Commission has a duty to act in the “public interest,” rendering consideration of pricing impacts always appropriate.[30]

Second, the court addressed Hu Honua’s argument that the Commission improperly compared the project’s greenhouse gas emissions to all energy alternatives.[31] At issue was Haw. Rev. Stat. § 269-6(b), which sets forth a number of factors—including greenhouse gas emissions—that the Commission must balance in determining the reasonableness of a proposed energy project’s costs.[32] Hu Honua argued that where a renewable energy project—such as its proposed biofuel facility—is under consideration, the Commission is limited to comparing the project to fossil-fuel plants and may not consider displacement of alternative renewable energy projects.[33] The court rejected this argument, concluding that in passing section 269-6(b), the Hawai'i legislature broadly intended for the Commission to consider “potentially harmful climate change due to the release of harmful greenhouse gases.”[34] In the court’s view, limiting comparison of a renewable energy project’s relative impacts to fossil fuel plants would result in an “artificial analysis” that would “sabotage” the legislature’s “climate goals” by forcing the Commission to treat all renewable energy projects alike.[35] In assessing the legislative purpose of section 269-6(b), the court also looked to another statute—Haw. Rev. Stat. § 225P-5—which sets forth “a state policy of achieving carbon neutrality ‘as quickly as practicable, but no later than 2045.’”[36] The court concluded that Hu Honua’s argument was at odds with the purported “urgency” expressed by the legislature.[37] The court further rejected Hu Honua’s arguments that subsequent amendments to section 269-6(b)’s text changed the analysis, concluding that legislative purpose cannot permit an interpretation that would limit the Commission’s discretion to broadly consider greenhouse gas emissions.[38]

Third, the court addressed Hu Honua’s argument that the Commission had violated its due process rights.[39] The court concluded that the Commission had merely weighed the evidence and found Hu Honua’s proffered evidence unpersuasive—an activity within its proper role as a finder of fact.[40] The court also concluded that Hu Honua itself had introduced the variable of “carbon neutrality” into the proceeding by pledging that its project would be carbon negative.[41] In the court’s view, the Commission was within its rights to address the persuasiveness of Hu Honua’s carbon neutrality pledge.[42]

Justice Wilson concurred with the majority’s conclusion that the Commission had acted in accordance with its duty to protect the right of Hawai'i’s people to “a clean and healthy environment.”[43] But Justice Wilson would have gone further. In his view, climate change is of such dire consequence that it cuts to the heart of Hawai'i’s entire constitutional order—such that the due process clause of article I, section 5 of the Hawai'i Constitution protects a “right to a life-sustaining climate system.”[44] Justice Wilson relied heavily on the District of Oregon’s decision in Juliana v. United States.[45] Justice Wilson decried the Ninth Circuit’s reversal of that decision and argued that the Supreme Court of Hawai'i must act where federal courts have not.[46] Justice Wilson additionally relied upon article XI, section 1 of the Hawai'i Constitution, which declares that “[a]ll public natural resources are held in trust by the State for the benefit of the people.”[47] Justice Wilson would hold that the climate system is a “natural resource” such that this “public trust doctrine” imposes an affirmative obligation on the Commission to make the reduction of greenhouse gas emissions its “primary consideration” when assessing energy purchase agreements.[48]

HELCO III relied heavily upon the purported legislative purpose of state law. It also affirmed a broad view of the Public Utilities Commission’s discretion to deny proposed energy purchase agreements on account of projected greenhouse emissions and climate change concerns.

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